DoD research, acquisition face double whammy from sequestration

Many people in the Pentagon believe that a second year of sequestration would be more painful than what the department went through in fiscal 2013. But the official who oversees acquisition and research and development matters said his programs will be hit twice as hard as the rest of the Defense Department budget next year.

Frank Kendall, the department’s undersecretary for acquisition, technology and logistics, said for 2013, DoD was in “damage limitation mode.” And while acquisition programs did take a hit, officials tried to keep programs mostly intact, not knowing where their final budget numbers would land.

But if sequestration stays in place and slices $52 billion from the Pentagon’s previous spending plans for 2014, he said acquisition and R&D programs will be impacted disproportionately, in part, because they are some of the few areas of spending that the department can reduce in a single budget year.

“We can’t take force structure out quickly, and we don’t want to sacrifice readiness dramatically, even though we’ve already done some of that,” he said. “Civilians can be cut, but it takes time to reduce them, and there are upfront costs associated with that. So the burden falls on research and development and procurement. If we’re talking about an overall budget cut of 10 percent across the department, you can about double that for the R&D and procurement accounts. That’s assuming we get the flexibility to move money around, and I’m not sure we will.”

Speaking to an audience at the annual ComDef conference in Washington, Kendall said DoD’s recent strategic choices and management review showed senior officials that they actually could find reasonable ways to reach sequestration-level spending caps, but only if they were given time to plan and make the reductions more thoughtfully over a period of several years.

Instead, he said, the department is in a state of constant uncertainty about where its budget is headed. So aside from looking for management efficiencies, it’s not sure how or where to make cuts as it tries to retain a balance of resourcing between the size of the military, how it’s equipped and how it’s prepared to operate.

“We don’t know where we’re going right now. And if we don’t know where we’re going, we’re going to be tempted to hang on to force structure that we really can’t afford,” he said. “By keeping that force structure, we’re shifting the burden onto other parts of the budget. That uncertainty is here now. We’re just a few weeks away from the start of the fiscal year. Nobody expects that there will be a budget in place by then, and nobody knows what the [continuing resolution] will say yet. We hope we’ll have more flexibility than we normally would, because we need it. We need much more flexibility than we had in ’13.”

Kendall didn’t offer specifics, but he said he already is tightening the Pentagon’s acquisition belt, trying to avoid signing contracts that DoD might end up having to terminate later.

“I’m already cutting back on some commitments of resources because of the uncertainty I’m facing. I just have to do that because we don’t know where we’re going to end up next year or long-term,” he said. “And it’s not about getting rid of fat or things we don’t really need. It’s about getting rid of things we do need, but that we need the least. That’s the situation we’re in.”

Smaller workforce unavoidable

Kendall’s office is behind DoD’s Better Buying Power initiative with its tagline of “getting better value for Defense dollars” — something he said is more important than ever at the moment. But, he said, the effort already has been harmed by sequestration because of the furloughs the cuts imposed on the civilian acquisition workforce this year.

Next year, DoD desperately wants to avoid furloughs, he said. But the overall size of the workforce is going to have to shrink one way or another.

“Whether that happens under a [reduction in force] or by us hiring virtually nobody at all, I don’t know yet,” he said. “It’s at least a [hiring freeze], possibly a RIF, and possibly furloughs again. We really don’t want to do furloughs again. It had a devastating effect on people, but the burden falls on industry too. One of the points I’ve tried to make to our workforce is that companies are losing money that we contract out and people are losing their jobs because of that. In the military, people don’t have the equipment and training they need. None of this is good. It affects everybody, it just affects people in different ways.”

Kendall admitted he’s in the camp that believed sequestration would never take place to begin with, and he says he’s not overly optimistic about a political deal that would eliminate it.

“I think what it’s going to take is enough visibility to the damage that’s being done to convince people that this has to be stopped,” he said. “It’s a death of a thousand cuts. It’s things like runways that aren’t being maintained, which increases the possibility of foreign object damage to airplanes. It’s facilities that aren’t being maintained. In one case, we have a facility we just built, but we can’t move into it because we can’t buy the furniture, so we have to stay in leased space. That costs us more money in the long term, but it’s a way to get by in the near term. We’re stretching out all of our R&D programs, we’re buying things at less economic rates, and those are bills we’re creating that we’re going to have to pay later. But we don’t have a way to pay them later, because we’re going to have to take even deeper cuts in 2014.”